Lack of oversight allows state firms to get away with wrongdoing: economist

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A view of the unusable floating dock No 83M if Vietnam's state-owned shipping company Vinalines, which is anchored at a port in Vietnam's southern Dong Nai Province, near Ho Chi Minh City, in a file photo taken in May 2012

There should be clear regulations for the assessment and oversight of state-owned enterprises, economist Nguyen Minh Phong tells Vietweek. Inspectors' suggestions should be implemented and reported back to them, and the failure to do this is making management of SOEs poor, he says.

Vietweek: State-owned enterprises (SOEs) are overseen by many ministries, but remain inefficient. They have been indulging in wrongdoing for many years but have not been pulled up. Why?

Nguyen Minh Phong: There are different reasons for different cases. But a common reason is that the current laws do not have specific regulations on SOEs. We have repealed the SOE law, but the Enterprise Law does not properly cover SOEs, while a law on public investment is yet in the draft form. So we lack a legal foundation for oversight of the firms. The oversight is not close enough, causing the issue you mentioned.

Under the current laws, state-owned economic groups established under a decision by the prime minister do not have to report to ministries. Inspectors from ministries and localities do not inspect the groups (the 2005 Enterprise Law allows state-owned companies the right to make their own decisions about investment projects).

Minister of Planning and Investment Bui Quang Vinh said he did not know about the wrongdoings at state-owned shipping giant Vinalines because it does not report about its business activities to his ministry. However, the ministry has the task of managing public projects. This is a gap in SOE management that allows them to get away with wrongdoing without being detected.

Figures on SOEs' assets, losses, and debts have not been fully or accurately disclosed. How should the disclosures be mandated to ensure effective public surveillance over them?

There are figures which are not publicized to ensure business and even national secrets. But there are figures which should be publicized to increase public oversight of SOEs' activities. Some SOEs have made use of the regulation to safeguard their business secrets. They claim that all figures are business and national secrets, which therefore are not published. These firms do not face any penalty if their business reports to relevant agencies are false or delayed. Obviously, there are big shortcomings in SOE management with regard to their reports.

To ensure figures are disclosed to enable oversight of SOEs, we should start by categorizing their business activities into for-profit and not-for-profit activities and drafting specific regulations for a mechanism to disclose information.

We should regulate which information should be publicized, when they should be publicized, who should take responsibility for inaccurate information, and how those people will be punished.

We should also have more specific regulations on representation of government ownership in SOEs and the responsibilities of individuals for losses. 

We should soon enact the Public Investment Law, which could review the regulations on SOE management, especially representation of government ownership in SOEs and responsibilities of individuals.

To improve, SOEs should not only become more transparent with their funds but also have good managers. What regulations are needed for this?

We should hire qualified people as managers of SOEs. We do not spell out the responsibilities of individuals in SOEs since many agencies and individuals are involved in managing them. In fact, it is not easy to spell out the responsibility of each individual in every stage of a firm's business.

We should learn from China and Russia. In Russia, a head of a ministry is not allowed to head SOEs. China allows SOEs to hire chief executive officers from all over the world. In China, the heads of SOEs would have to set business targets for every year and take responsibility for achieving them.

How is the coordination between ministries and sectors in overseeing SOEs?

They do not have any coordination. We do not have specific regulations for their coordination. Moreover, no one is responsible or accountable for this lack of coordination. Thus, Vinalines's wrongdoings were not detected despite many inspections over the years (a multimillion dollar graft case was detected at state-owned shipping giant Vinalines, and its former head Duong Chi Dung fled the country last year before being arrested in Cambodia).

Nobody has to take responsibility for the shortcomings. In Vietnam, there is a shortage of coordination among individuals and agencies. There are no regulations, so agencies do not have proper coordination. In some cases, they do not do it because proper coordination could affect the benefits of some individuals.

What should we do to improve oversight of SOEs?

We should draft specific regulations for assessment and oversight of SOEs' activities. Proposals made by inspectors should be implemented by related agencies and the results should be reported back to them. Inspectors could inspect how their proposals have been implemented. We should also spell out the responsibility of individuals in the field. If all these are done, SOE oversight will [improve].

Now many of the inspectors' suggestions are not implemented and they are not apprised about the action taken.

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